Scripps Buys Katz Diginets For $302 Million

The E.W. Scripps Co. today acquired the Katz broadcast multicast networks, which distribute programming for targeted audiences over the air, in a deal worth $302 million. The four national networks — Bounce, Grit, Escape and Laff — each reach more than 80% of all U.S. households.

“In today’s fragmented television ecosystem, a growing number of viewers are consuming content from new over-the-air networks as a complement to over-the-top services,” said Rich Boehne, Scripps chairman, president-CEO. “The entrepreneurs at Katz were among the first to take full advantage of this resurgence in over-the-air viewing. We were early investors in the company, and it’s a strategy and team we know well.

“Acquiring these innovators will increase our opportunity to serve the nation’s largest advertisers, who see tremendous value in the networks’ content and the large, targeted audiences they draw.”

Scripps was already a 5% owner in a portion of the business, so its net purchase price is $292 million. The deal will be treated as a purchase of assets for tax purposes. After including the present value of the future tax benefits, the purchase multiple is about 8x, based on its forecast for 2018 segment profit. 

Because of the strong corporate debt market, Scripps said it intends to finance the transaction with $250 million of new debt and about $50 million of cash on hand. Upon closing, Scripps’ leverage is expected to be about 3x on a pro forma 2017/18 blended basis. At June 30, Scripps had $150 million of cash on its balance sheet and unfunded revolver commitments of $125 million.

The transaction is subject to Hart-Scott-Rodino clearance and customary closing conditions and is expected to close Oct. 2. 

Scripps said the four networks are forecast to generate about $180 million in revenue and about $30 million in segment profit in 2018. The transaction is expected to be accretive to Scripps’ earnings in 2018 and beyond.

Founder Jonathan Katz, a former top Turner Broadcasting programming executive, will continue to lead the Katz networks business. The company, with about 130 employees, will remain based in the Atlanta area.

All four networks are Nielsen rated and depend on a blend of general-market and direct-response advertising.

Bounce TV launched in 2011 and is the first and only African-American broadcast network on television. The Bounce programming lineup features original dramas and off-network series, movies, specials, live sports and more.

Grit launched in 2014 targeting men 25-54 with a lineup of Western, war and action films.

Excape also launched in 2014, to reach women ages 25-54 with a brand of programming anchored in stories of investigation and mystery.

Laff, the nation’s first over-the-air network devoted to comedy around the clock, went live in 2015 with contemporary off-network sitcoms and popular movies geared toward an audience of adults ages 18-49.

“Television is changing as over-the-air, cable and OTT all come together into a more seamless viewing experience for consumers,” said Adam Symson, chief operating officer for Scripps. “With national reach and scale, the Katz networks represent valuable real estate, consistent with our strategy to remain a leader in the evolving TV landscape.”